Semiconductors have become so ubiquitous and important in our modern lives that people refer to the tiny electronic wafers as the “oil of the 21st century.” McKinsey & Co. has labeled the 2020s the “semiconductor decade” and forecast that the global industry will be worth $1 trillion by 2030. The entire sector has been riding high over the last 18 months as artificial intelligence captures people’s imaginations and has come to dominate the corporate world. This has led to this list of semiconductor stocks to buy now.
For more than a year now, semiconductor stocks have outperformed and led the market higher, fueled by AI demand. Some semiconductor stocks have seen their share price triple over the past 12 months. Can the red hot rally last? While share prices are pulling back with the broader market right now, the long-term trade looks to still be intact. Analysts seem to be in agreement that we are in the early innings of the AI revolution. Here are three semiconductor stocks to buy now: Q2 edition.
Intel (INTC)
There’s a few reasons to consider Intel (NASDAQ:INTC) right now. The semiconductor company has been awarded $8.5 billion from the U.S. government through the Chips and Science Act, which will help it build manufacturing facilities in Arizona, New Mexico, Ohio, and Oregon. Intel also recently unveiled a brand new AI microchip called the “Gaudi 3” that the company says can be used to train and deploy AI models and chatbots. The new chip should be available in the third quarter of this year and help to boost future sales.
Intel claims the new Gaudi 3 chip is twice as power-efficient and one-and-a-half times faster than rival Nvidia’s (NASDAQ:NVDA) competing H100 microchip that is widely used with AI. INTC stock currently looks like a buy-the-dip candidate having fallen 25% on the year. A report at the start of April that the company’s manufacturing business lost $7 billion hasn’t helped the share price. But better days look to be ahead with the government funding secured and the new AI chip coming to market. This makes it one of those semiconductor stocks to buy now.
Arm Holdings (ARM)
There was a lot of concern about Arm Holdings (NASDAQ:ARM) stock in March. Wall Street was expecting a big selloff as the lock-up period expired following the British semiconductor company’s initial public offering (IPO) last September. There were worries that Arm’s largest shareholder, SoftBank Group, which owns 90% of the company or about 900 million shares, was going to dump the stock. Mercifully, that didn’t happen and SoftBank looks to be invested in ARM stock for the long haul.
Speaking of ARM stock, it has risen 56% year to date and has gained 77% since its IPO less than a year ago. The share price has been ripping higher since the company reported a profit for the fourth quarter of 2023, its first full quarter as a publicly traded company, and issued bullish forward guidance. It’s worth noting that Arm’s chips are used in nearly every smartphone and most computers in the world.
Broadcom (AVGO)
Semiconductor company Broadcom’s (NASDAQ:AVGO) stock has doubled in the last 12 months and continues to perform well. The company also closed its $69 billion acquisition of cloud-computing firm VMware late last year, further expanding its reach and influence. And, Broadcom’s earnings are getting a boost from strong AI demand. These factors all make AVGO stock worth buying now. The 23 analysts who cover the company rate its shares a “strong buy” with an average price target that’s 22% higher than current levels.
The company’s fourth quarter 2023 financial results were very strong, with Broadcom announcing earnings per share of $10.99, beating Wall Street estimates of $10.40. Revenue in the quarter totaled $11.96 billion, which was also above estimates of $11.80 billion. Management continues to stress that they are seeing strong demand for their chips in AI data centers. Broadcom’s semiconductors are also used in networking, server storage, and industrial applications. The company next reports earnings on June 12. All in all, it’s one of those semiconductor stocks to buy now.
On the date of publication, Joel Baglole held a long position in NVDA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.